I am a freelancer and have income from multiple sources. Most of the sources cut tax deducted at source (TDS) at the rate of 10% before making the payments. However, my total income is above the 10% tax slab. How do I go about filing my income tax return (ITR)? When should I pay the extra tax payable by me to ensure that I do not have to pay any penalty?
If your total tax liability (net of tax deducted at source) on the estimated income is likely to be ₹10,000 or more during the relevant financial year (FY), you are required to pay such tax by way of prescribed advance tax instalments during the FY itself. For FY21, an individual is required to pay advance tax in four specified instalments—15% of total tax by 15 June 2020, 45% of total tax by 15 September 2020, 75% of total tax by 15 December 2020 and 100% of total tax by 15 March 2021.
Any delay or deferment in payment of advance tax will have interest implications. Interest under Section 234C of the Income-tax Act, 1961 is levied on the amount of default or shortfall in payment of advance tax due, as per the prescribed instalment, at the rate of 1% for every month or part thereof.
If an individual has failed to pay the advance tax or where the tax paid by him is less than 90% of such tax paid by 31 March 2021, then he shall also be liable to pay interest under Section 234B of the Act, at the rate of 1% for every month or part of a month from 1 April of the subsequent FY till the date of payment of such taxes. Hence, even after 15 March 2021, estimate your tax liability for FY21, to ensure that you have paid adequately to meet your tax liability.
Also, in case of delay in filing of your ITR within the prescribed due date (as applicable to you depending upon your income streams and requirement of a tax audit filing), interest is levied under Section 234A, on the unpaid tax amount at the rate of 1% for every month or part thereof during which the default continues. This tax along with interest should be paid before the filing of returns.
It may be noted that as per the Tax Ordinance 2020 (2 of 2020) dated 31 March 2020, the tax authorities reduced the rate of interest to 0.75% per month for delay in depositing tax for any due date, which falls during the period from 20 March 2020 to 29 June 2020, provided the relevant taxes are paid on or before 30 June 2020. Accordingly, for the first instalment, if the advance taxes are not discharged by 15 June 2020 but paid on or before 30 June 2020, the rate of interest applicable for the delay in deposit of the advance tax for first instalment shall be 0.75% per month.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India. Queries and views at firstname.lastname@example.org